Bank of America (NYSE:BAC) is paying a whopping $250 million fine in its latest scandal where the bank double charged insufficient fund fees and opened new accounts without customer’s knowledge or consent.
The Consumer Financial Protection Bureau announced Tuesday that an investigation found that Bank of America harmed hundreds of thousands of customers across multiple product lines over a period of several years through a series of illegal practices.
As a result, Bank of America was ordered to pay over $100 million to customers and another $90 million in penalties. A separate $60 million fine has been ordered by the Office of the Comptroller of the Currency for violating laws around overdraft fees, reports NPR.
“CFPB Director Rohit Chopra said in a news release that Bank of America’s double-dipping on fees, opening accounts without customer consent and withholding rewards “are illegal and undermine customer trust,” practices he said the CFPB will put an end to across the banking system.”
Not only was Bank of America charging customers who had insufficient funds a $35 fee, but the bank also repeatedly charged customers the same transaction racking up significant revenue.
Chopra told NPR Business Correspondent David Gura, “Building a business model by double dipping on fees is simply not legal, and that’s why we’ve sanctioned Bank of America and ordered them to pay back the customers they cheated.”
The OCC said it found that the bank charged “tens of millions of dollars” in fees in resubmitted transactions, in violation of Section 5 of the Federal Trade Commission Act, which prevents financial institutions from using unfair or deceptive acts and practices.
Like many of its peers, Bank of America continues to be a repeat offender.
BAC stock is currently down more than -13% this year-to-date.
New Study Shows Bank of America Leads in Market Losses
A new study shows Bank of America (NYSE:BAC) is leading in market cap losses compared to its peers this year.
Dow Jones market data shows Bank of America has suffered a -$36.9 billion drop in market capitalization since March 8 of this year.
In second place is U.S. Bancorp with -$20.11 billion, followed by Truist at -$17.49 billion.
Wells Fargo earns fourth place with a market cap loss of -13.91 billion and PNC in fifth with -$8.69 billion in losses.
Regulators have said that the banking system is safe and that deposits have stabilized after record outflows across the system in the first quarter.
Many banks still posted solid first-quarter profits because they were able to charge more interest on loans than they paid to depositors, per WSJ.
However, investors and customers remain on alert.
The $472 billion outflow in deposits outpaced the drop that banks saw following 2008 financial crash shattering a 29-year record,” says Boston Business Journal.
Investors dumped banks after the collapse of Silicon Valley Bank and Signature Bank in March which sparked a crisis of confidence in the system and led short sellers to take advantage of the volatility.
Banks are bracing for more turmoil heading into the third quarter this year.
Are you concerned about the banking sector? I’m curious to hear your thoughts on this – leave a comment down below.
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